Brits moving to Spain beware of unexpected UK tax bills on rent, property sales and pensions if strict HMRC deadlines are missed

On 5 October, Pedro Sánchez announced a general election set for 29 November. A recurring topic of discussion is whether Spain's pension system is on the verge of bankruptcy. In 2025, the country set a record for its monthly pension expenditure, reaching almost €14.5 billion. Despite reporting its smallest deficit since 2011, the Social Security system still shoulders more than 20% of its income from the state, owes over €136 billion to the Treasury, and the effects of the baby-boom generation's mass retirement are yet to fully materialize.

The question isn't whether pensions will be paid, but who will shoulder the increasing costs. Spain's pension system operates on a "pay-as-you-go" basis, where today's contributions finance today's pensions. There is no individual account for each worker or a fund that can simply run out. The Constitution obligates the state to ensure adequate pensions and regularly update them. If the system falls short, the deficit can be covered through state loans or transfers.

Santiago Calvo, a professor of quantitative and public economics, emphasizes that Social Security cannot fail like a company as the state can back it up by raising taxes and issuing debt. However, this shift of risk onto the state itself poses a problem. According to Calvo's co-authored book "El elefante en la habitación," a Greek-style default could occur after years of borrowing to cover the gap.

This would lead to a recession or a spike in interest rates, driving up borrowing costs until Spain can no longer finance itself at a reasonable cost. The biggest budget item would then be the first to be cut, with Greece's average pension falling from around €1,350 in 2009 to €833 a few years later.